Fisher's remarks drive stocks higher

By Ellen Simon
Associated Press

NEW YORK » Stocks rose smartly yesterday after Dallas Federal Reserve President Richard Fisher suggested inflation would be dampened by a slowing economy and said that while the housing and auto sectors are economic weak points, the rest of the U.S. economy is doing "extremely well."

The bond market, however, seems convinced an economic downturn -- and cuts in the Fed's benchmark short-term interest rate, are on the way.

The yield on the 10-year Treasury note fell to 4.54 percent from 4.59 percent Friday. The yield on the 10-year Treasury bill has plummeted quickly and now stands at a seven-month low.

Fisher's remarks pushed stocks higher in what had been a session of seesaw trading, with investors first bidding stocks higher on lower oil prices, then sending them lower on falling housing prices. Investors, alert to any sign of a sharp economic slowdown, have been especially skittish in recent sessions as data has shown a slowing housing market while bond yields and oil prices have fallen hard.

While the steep and sudden falloff in bond yields, slowing housing and lower commodities prices seem to indicate the economy will grow at a slower pace, not every investor feels the slowdown will be dramatic.

"The pace of growth could slow down, but that doesn't mean the market is going to get killed," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. "I think it's early to talk about a recession."

The Dow Jones industrial average gained 67.71, or 0.59 percent, to 11,575.81.

Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.80 billion shares, up from 2.26 billion Friday. The technology, consumer discretionary and utilities sectors were the day's biggest gainers.

Stocks bounced higher at the open yesterday after oil prices fell to six-month lows when BP PLC said it had permission to restart the eastern half of Alaska's Prudhoe Bay oil field, which should expand oil inventories. Oil prices rose in the afternoon, with a barrel of light crude settling at $61.45, up 90 cents, on the New York Mercantile Exchange. The price of natural gas sagged, falling to a three-year low.